Logistics group is already taking advantage of bullish climate
Grindrod spends R2bn expanding fleet
February 16, 2005
By Samantha Enslin
Durban - Grindrod, the shipping and logistics group, has spent almost R2 billion on expanding its fleet to take advantage of strong shipping markets and to ensure sustainable future earnings growth.
Ivan Clark, Grindrod's managing director, said yesterday "the ships have been ordered or purchased at competitive prices and with the strong rand are good buys in rand terms, although some have been financed in US dollars".
"These good buys will add to our stated policy of creating sustainability and growth of earnings going into the future."
Grindrod will release its 2004 results next week. It has already advised shareholders that it was likely to report a rise in earnings of between 130 percent and 140 percent. These results follow consistent growth in earnings since 2000.
Peter Armitage, an analyst at Nedcor Securities, said: "It is increasingly likely that Grindrod will grow earnings over the next two years. For the last few months were have forecast fair value for the share price at R45. The outlook could now be upgraded."
Buoyed by Grindrod's solid prospects, the company's share price has soared almost 570 percent to R44.08 in the past 18 months.
Yesterday Grindrod closed 70c higher at R42.90. The transport index fell 0.67 percent.
The expansion includes the recent purchase of a 605 twenty-foot equivalent unit geared container ship for $7 million (R42.22 million), an order for four new 12 800 deadweight tonnage oil or chemical tankers for $72 million and the delivery of a 32 000 deadweight tonnage handysize bulk carrier, in which Grindrod has a 50 percent share, at a cost of $10 million.
These recent deals follow a $200 million order for seven new product tankers, which will result in Grindrod operating a substantial fleet by the end of 2007.
The purchase programme began in 2001. Three have been delivered, one has been sold and three will be delivered by 2007.
Clark said: "We now have delivered, on order or on long-term charter, a modern fleet of ships at competitive prices on low charter in rates.
"A fair number of these have been chartered out at good rates for medium to long periods and we hope to fix out more long terms charters as additional ships [are] delivered."
The outlook for shipping markets remains buoyant. The tanker market has been bullish for several months due to seasonal demand during the northern hemisphere's winter.
London shipbroker Clarksons expects the trend to continue into 2008. A shortage of refinery capacity in the US means growing demand for refined products will not be met.
This is because environmental lobbies have succeeded in curtailing the expansion of North American refineries.
Analysts believe China will continue to need huge volumes of imported energy, which will increase demand for vessels.
Grindrod also plans to spend R1 billion on strengthening its land side operations.
As part of this strategy it recently bought a controlling interest in coal and bulk terminals in Walvis Bay and Maputo.
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